Written by Econintersect
Early Bird Headlines 14 February 2017
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Global
Asia markets lower; investors wary ahead of Fed chair testimony (CNBC) Asian markets were mostly lower on Tuesday, as investors tread cautiously ahead of the Federal Reserve chair’s two-day congressional testimony starting Tuesday for her comments on banking regulations and potential hints of the Fed’s rate hike trajectory. The dollar slipped from its three-week high below the 111 handle, to trade at 100.84 against a currency basket during Asian trade. During Asian trade, Brent crude futures recovered from the overnight 2% drop in Monday U.S. trade, to trade up 0.25% at $53.06 a barrel, while U.S. crude added 0.23% at $53.06.
U.S.
National Security Adviser Michael Flynn resigns (The Hill) National Security Adviser Michael Flynn has resigned, after reports he misled senior Trump White House officials about his conversations with Russia. President Trump has named retired Army Lt. Gen. Keith Kellogg as acting national security adviser. Kellogg previously served as Flynn’s chief of staff on the National Security Council. The embattled Flynn blamed his resignation late Monday on the “fast pace of events” that led him to “inadvertently” give Vice President Mike Penceand others “incomplete information” about his phone conversations with Russia’s ambassador to the U.S., Sergey Kislyak.
Ex-Goldman banker Mnuchin installed as Treasury secretary (Reuters) President Donald Trump swore in former Goldman Sachs banker and Hollywood financier Steven Mnuchin as Treasury secretary on Monday, putting him to work on tax reform, financial de-regulation and economic diplomacy efforts. The U.S. Senate voted to confirm Mnuchin 53-47, with all but one Democrat opposing him over his handling of thousands of foreclosures as head of OneWest Bank after the 2007-2009 housing collapse. At a White House swearing-in ceremony, Trump said Mnuchin would be a “great champion” for U.S. citizens.
Trump’s Anachronistic Trade Strategy (Project Syndicate) According to this article, Pres. Trump’s protectionist policies won’t bring higher employment to the U.S. Instead it will bring greater amounts of robotic manufacturing, which will come at a higher cost. Not only will Americans still be lacking good-paying jobs but they will be able to afford less of the higher priced goods on the market.
Many working- and middle-class Americans believe that free-trade agreements are why their incomes have stagnated over the past two decades. So Trump intends to provide them with “protection” by putting protectionists in charge.
But Trump and his triumvirate have misdiagnosed the problem. While globalization is an important factor in the hollowing out of the middle class, so, too, is automation. Most of Lighthizer and Ross’s business experience has been in twentieth-century industries such as steel production, which has conditioned them to pursue twentieth-century solutions for America’s twenty-first-century industrial problems.
Unfortunately, old-fashioned protectionism will not boost American industrial competitiveness, even if it saves a few thousand jobs in sunset sectors. Moreover, ripping up trade agreements and raising tariffs will do nothing to create new, high-paying factory jobs. If anything, tariffs will only inflict further harm on workers.
Trump and his team are missing a simple point: twenty-first-century globalization is knowledge-led, not trade-led. Radically reduced communication costs have enabled US firms to move production to lower-wage countries. Meanwhile, to keep their production processes synced, firms have also offshored much of their technical, marketing, and managerial knowhow. This “knowledge offshoring” is what has really changed the game for American workers.
Federal judge halts Trump travel ban for Virginia residents (The Hill) A federal judge in Virginia has issued a preliminary injunction to halt enforcement President Trump’s travel ban, according to reports, the latest setback against the president’s executive order. The injunction applies only to residents of the commonwealth, as well as students or employees of public universities in Virginia. U.S. District Court Judge Leonie Brinkema ruled that Trump’s executive order likely violates First Amendment protections against the freedom of religion, according to the decision.
UK
Brexit not as bad for the UK as we thought, says EU, as it revises country’s growth figures upwards (City A.M.) The European Commission has become the latest body to lift its UK growth forecast, admitting today that the impact of Brexit might not be as bad as it originally feared. EU forecasters now expect the UK economy to expand 1.5% this year, up from their prediction of just 1.0% growth, made back in November. The report read:
“The impact of the vote, by the UK to leave the EU in the referendum held on 23 June 2016, on growth has yet to be felt.”
Commuters warned of air pollution risk (The Times) Travelling by public transport exposes commuters to up to eight times as much air pollution as those who drive to work, a groundbreaking study found. In the latest evidence of the health risks posed by rising traffic levels, researchers found that drivers commuting in diesel cars did the most harm to the wellbeing of other travellers – producing six times as much pollution as the average bus passenger. The authors said that the results revealed a “violation of the core principle of environmental justice” because those who contributed most to air pollution in cities were least likely to suffer from it. People in poorer areas, who are more reliant on buses to get to work, suffer greater exposure than those in wealthier neighbourhoods, who are more likely to commute by car, according to the study by the University of Surrey.
One in five startups is planning to set up in Europe because of Brexit (City A.M.) The majority of startups (62%) are not considering setting up even a base outside the UK, allaying some concern in the tech industry that Brexit would cause a large exodus of startups. Only 1% of the startups surveyed by Silicon Valley Bank said they will move their HQ to somewhere else in Europe, and 5% to somewhere outside both the UK and Europe. A further 11% said they are mulling over whether to relocate or not, while 21% said they would set up an outpost in Europe but keep their headquarters in the UK.
Germany
German Growth Accelerates Less Than Forecast Amid Trade Drag (Bloomberg) Gross domestic product rose a seasonally-adjusted 0.4% in the three months through December, the Federal Statistics Office in Wiesbaden said on Tuesday, after predicting in January that the economy expanded about half a percent in the period. The rate is below the 0.5% forecast in a Bloomberg survey, and follows revised growth of 0.1% in the third quarter. With annual expansion of 1.9% last year, Germany has driven Europe’s moderate but resilient recovery that also benefited from a weak euro, cheap oil and the European Central Bank’s stimulus policies. While these tailwinds boosted consumer spending and supported exports, rising inflation pressures and uncertain prospects for global trade have cast doubt over whether the pace of growth can be maintained.
Germany to deepen military ties with France, others: sources (Reuters) Germany will move forward this week with plans to set up a joint fleet of Lockheed Martin Corp C-130J transport planes with France and join a Netherlands-led fleet of Airbus A330 tanker planes, defense ministry sources said on Monday. Those and several other initiatives with Norway, Romania and the Czech Republic are part of a broader drive to expand European defense cooperation to be announced at a meeting of NATO defense ministers in Brussels, the sources said. The agreements come as Germany and other NATO members face increasing pressure from the United States to spend more for their own military and reach NATO’s target of devoting 2% of gross domestic product to defense spending.
Turkey
Turkish police detain more than 500 people in operations targeting PKK – Anadolu (Reuters) Turkish police detained more than 500 people on Monday in operations across Turkey targeting suspects linked with the Kurdistan Workers Party (PKK) militant group, state-run Anadolu news agency reported. It said senior members of the group were among the 544 suspects held in operations across 25 provinces, including the major western cities of Istanbul and Izmir. Officials from the pro-Kurdish Peoples’ Democratic Party (HDP) were among the 45 detained in the southeastern province of Gaziantep, the provincial governor’s said in a statement.
The government accuses the HDP, the second biggest opposition party in parliament, of being a political extension of the PKK and many of its officials and MPs have been remanded in custody on charges of such links.
The PKK, designated a terrorist group by Turkey, the European Union and United States, launched an armed insurgency against the state in 1984 and more than 40,000 people have been killed in the conflict.
A ceasefire between the PKK and the state broke down in July 2015 and thousands have been killed in conflict since then.
India
Indian retail inflation lowest in at least five years (Reuters) India’s inflation cooled to its lowest in at least five years in January as food prices fell following the government’s cash clampdown, but emerging price pressures mean the Reserve Bank of India (RBI) will probably keep interest rates on hold. Consumer prices rose by an annual 3.17% last month – their slowest pace since January 2012, when the government launched the current index series. Economists surveyed by Reuters had expected prices to rise by 3.22% from a year earlier, compared with December’s 3.41% increase. Annual retail food inflation eased to 0.53% last month from 1.37% in December, helped by lower prices for vegetables and pulses, government data showed on Monday.
India’s wholesale prices up 5.25 percent in January (Reuters) India’s wholesale prices rose 5.25% year-on-year in January compared with a 1.07% decline a year ago, government data showed on Tuesday. The data compared with a 3.89% annual rise forecast by economists in a Reuters poll. In December, prices rose a provisional 3.39%. Last month, wholesale food prices fell 0.56% year-on-year, compared with a provisional 0.70% fall in December.
North Korea
U.N., Trump denounce North Korea, but no sign of any action (Reuters) The U.N. Security Council denounced North Korea’s weekend missile launch, urging members to “redouble efforts” to enforce sanctions against the reclusive state, but gave no indications of any action it might take. Pyongyang’s test of the intermediate-range ballistic missile on Sunday was its first direct challenge to the international community since U.S. President Donald Trump took office on Jan. 20. At a news conference on Monday, Trump said: “Obviously North Korea is a big, big problem and we will deal with that very strongly.” Trump did not speak of any planned response but Washington’s U.N. ambassador Nikki Haley said in a statement:
“It is time to hold North Korea accountable – not with our words, but with our actions.”
China
China Will Avoid a Bank Crisis, Reach High Income Status: Morgan Stanley (Bloomberg) China will likely avoid a financial crisis and is on track to reach high income status by 2027, according to a new Morgan Stanley report on the nation’s longer-term prospects titled “Why we are bullish on China.” Over the next decade per capita incomes are expected to rise more than 50% to $12,900 from $8,100 now.
